Volume 6 - Article 13 | Pages 355–382  

To Tie the Knot or Not: Cohabitation, Marriage and Individuals' Attitudes to Risk

By Padma Rao Sahib, Xinhua Gu

Abstract

This paper introduces imperfect information, learning, and risk aversion in a two sided matching model. The model provides a theoretical framework for the commonly occurring phenomenon of cohabitation followed by marriage, and is consistent with empirical findings on these institutions.
The paper has three major results. First, individuals set higher standards for marriage than for cohabitation. When the true worth of a cohabiting partner is revealed, some cohabiting unions are converted into marriage while others are not. Second, individuals cohabit within classes. Third, the premium that compensates individuals for the higher risk involved in marriage over a cohabiting partnership is derived. This premium can be decomposed into two parts. The first part is a function of the individual's level of risk aversion, while the second part is a function of the difference in risk between marriage and cohabitation.

Author's Affiliation

• Padma Rao Sahib - Rijksuniversiteit Groningen, the Netherlands EMAIL
• Xinhua Gu - University of Toronto, Canada EMAIL

Most recent similar articles in Demographic Research

Left behind single in the partnering market? Entry into cohabiting unions by women and men with low educational attainment across regions of Europe, cohorts 1960 to 1985
Volume 51 - Article 43    | Keywords: cohabitation, education, Europe, European Social Survey, event history analysis, logistic regression, marginalization, partner selection, singlehood, union formation

Between money and intimacy: Brideprice, marriage, and women’s position in contemporary China
Volume 50 - Article 46    | Keywords: brideprice, China, divorce, family, family law, gender inequalities, marriage

Age-heterogamous partnerships: Prevalence and partner differences by marital status and gender composition
Volume 50 - Article 23    | Keywords: age heterogamy, assortative mating, cohabitation, marriage, same-sex couples, unions

Ultra-Orthodox fertility and marriage in the United States: Evidence from the American Community Survey
Volume 49 - Article 29    | Keywords: age at first marriage, American Community Survey (ACS), fertility, Judaism, marriage, religion, total fertility rate (TFR), Ultra-Orthodox Judaism

An alternative version of the second demographic transition? Changing pathways to first marriage in Japan
Volume 49 - Article 16    | Keywords: cohabitation, first marriages, pattern of disadvantage, premarital children, second demographic transition, transition